BOOK REVIEW: When Principles Pay - Corporate Social Responsibility and the Bottom LineGeoffrey Heal: €22
THE BUSINESS pages of newspapers and magazines would suggest that business seems to find it necessary to behave in an unprincipled and irresponsible manner to make money. Headlines about rogue lawyers, cowboy building contractors and miss-selling financial advisers catch the eye of the readers. Good corporate behaviour is not so often highlighted in the media; it is not so newsworthy. But, as Geoffrey Heal of Columbia Business School points out, many of the worst offenders have ended their working days being fired, fined or jailed.
The stories of good corporate behaviour appear to contradict the generally held belief that big multinational corporates have a negative impact on the societies that their activities touch. There are dozens of corporate war stories discussed in this book, which all touch on the "incentives" that firms face when making choices about such issues as minimising their impact on the environment or taking a stance that supports minorities in the community.
These incentives exist in the intersection of market forces, the legal system and, increasingly, civil society (through activist groups, NGOs, consumer lobbies etc).
The need for incentives to encourage firms to act responsibly is discussed in the context of iconic economic theories, that "business has only one social responsibility, to use its resources to increase profits" (Milton Friedman ) and by "pursuing his own interests he will promote the good in society" (Adam Smith). These theories of the power of the "invisible hand" of the market are, in the view of the author, missing the point that (in some industries) there are external societal costs that are not borne by the firm. Examples of such "external costs" that are included in this analysis include the environmental impact of the oil and automotive industry, and the healthcare costs of the tobacco industry.
Firms operating in these areas may not have a perfect alignment between their individual corporate objectives and the needs to address the costs they generate to society.
Such instances provide the rationale for the existence of many governmental watchdog agencies, social responsible investment funds and non-governmental organisations that put pressure on firms to act responsibly. Many of the case studies describe firms that "do good" in order to manage their enterprise risk.
This is a very optimistic book, with an uplifting account of how businesses can, and should, improve their financial performance through good corporate socially responsible behaviour.
In the last few years there has been a significant increase in interest among Irish business leaders in how they can make a positive social impact. This is a book well worth reading by those leaders, so they can more clearly understand how "doing well" can coincide with "doing good".
• Michael Carey is executive chairman of the Jacob Fruitfield Food Group. He is also a director of Traidlinks, the Irish private sector non-profit NGO that provides support to encourage the development of ethical enterprise in Sub-Saharan Africa and has recently returned from the Ernst Young Entrepreneur of the Year CSR Retreat to Haiti.
